Download MAKES THE PRODUCT - ELECTRICITY Costs included in Energy

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Viticulture– Electricity procurement
This is an AgriFood Skills Australia Ltd project developed in partnership with Energetics Pty Ltd and
funded by the Australian Government under the Clean Energy and Other Skills Package
National Electricity Market (NEM)
• National Electricity Market
established in 1998 to facilitate
deregulation.
• Electricity can physically flow
between states.
• Each state has separate markets
where generators can sell their
output and retailers can buy their
demand.
– Prices set by supply and demand
• WA electricity market and billing
differs significantly to the NEM
Source: AEMO SOO 2009
Deregulation– electricity
• For customers, deregulation means:
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The right to choose who supplies your electricity invoices
No change to network provider
Small sites typically retain bundled billing
Large sites on contract move to unbundled billing
• NSW, ACT, SA, VIC, QLD fully deregulated
• WA, TAS, NT partially deregulated
• For other energy supplies, ask your supplier if your account
is ‘contestable’
Electricity Invoices
Formats and Components of Electricity
Billing
Electricity Supply Chain
MAKES THE PRODUCT - ELECTRICITY
GENERATION
TRANSMISSION
DISTRIBUTION
RETAILER
CUSTOMER
Costs included in Energy Charges
DELIVERS THE PRODUCT TO THE SYSTEM
Regulated & Passed on to Retailer via Network Charges
DELIVERS THE PRODUCT TO THE CUSTOMER
Owns the Poles and Wires. Regulated Network Charges.
SELLS THE PRODUCT TO THE CUSTOMER
Manages Risk & Bundles Charges.
THE END USER
Uses the electricity & pays the retailer
Typical bundled invoice small sites
Individual Cost Elements Not
Identified On Bill
Typical unbundled invoice large sites
Generator
Contestable.
Prices vary by
supplier.
Transmission lines
Distribution lines
NonContestable.
Prices vary by
location.
NonContestable.
Prices vary by
state.
Market Manager
Contestable.
Prices vary
by supplier.
AEMO
Meter Agent
Charge components
• Energy – generator, retail margin (in c/kWh, may be a single
rate or have time-of-use components, e.g. night-rate)
• Network – transmission + distribution (c/kWh for small
customers, includes demand ($/kW or kVA) for large users)
• Market – NEM fees (in c/kWh and typically <1% of costs)
• Metering – fee for each metering point
• Environmental – renewable energy, retailer obligation scheme
pass-through fees, carbon price (usually passed through as
c/kWh charges)
• GreenPower – users may voluntarily purchase accredited
renewable energy on top of charges passed through – e.g. as
part of being ‘carbon neutral’
Contracting Principles – for
vineyards that are large enough to
warrant using a structured market
approach
What does a contract cover?
• Energy price and quantity
• Contribution to mandatory environmental obligations (RECs,
NGACs, GECs etc)
• Metering (optional)
• Account management
• Billing
Not:
• Delivery of energy
• Security of supply
• Regulated charges
• Losses
Types of Contract
Decreasing budget certainty, but potentially higher reward
1. Fixed price fixed volume forward contracting
2. Flexible forward purchase of variable volume
3. Fixed block purchase (e.g. with generator) with partial pool exposure
4. Portfolio purchase of fixed volume (partial pool exposure)
5. Managed pool exposure with active demand management or
financial cover
6. Pool price pass-through
Over 95% of contract customers use Option 1
Option 1–Fixed Price Fixed Volume
• Customer agrees to buy from retailer for fixed price for a set
term
– “Standard” form of electricity contract
Advantages
Disadvantages
All market risk is on retailer – no exposure
to rising market prices.
No benefits will be received if market
prices fall during the contract.
Standard form of contract with low
ongoing maintenance.
Little flexibility should your requirements
change mid-contract.
Price certainty – retail elements of an
invoice will not change from the agreed
rates.
If you are a large irrigator with flexibility in
your pumping operations a partial or full
pool exposure might be worth considering
Issues to consider when contracting
• Timing and approvals
– take advantage of price dips, reduce the offer validity period and
have a rapid approvals process
• Duration of contract sought
– Short term (e.g. 12 month) contracts for new supplies to allow load
profiles to be built
• Information / data
– Provide detailed and accurate data, including information about
future changes where known
• Environmental charges (RECs, GECs, NGACs and NRECs)
• Additional account services – are services such as electronic
billing and data provision required?
• Voluntary GreenPower – e.g. for carbon neutrality
Opportunities for Savings
Steps to assessing savings
Assess opportunities for:
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Switching franchise tariffs , particularly to offpeak rates for water pumping (if applicable)
Your network (wires and poles) operator may be able to incentivise you to reduce peak
demand at critical times (e.g. peak summer heat)
Enquire about peak pricing with your retailer
Moving to contract - evaluate risks and opportunities in contracting separately for energy,
enviro and metering
Switching supplier – if you are a smaller user you should shop around to find the best deal
for the short and medium term, taking on board forecast trends in energy prices
Power factor correction, if your site is on a kVA-demand tariff
Evaluate ways to change your supply mix that can produce long term benefits (e.g. diesel or
electric motors, solar PV, biomass energy generation)
Use your knowledge of your energy rates to work out the cost to run equipment that you
are considering purchasing, and make this part of your decision-making
Monitor and meter your energy use regularly!